City creates "special fund" to take us to a happy place
Wouldn’t life be so nice if we could all produce a “special fund” to create the illusion that our problems have disappeared? Take us to a “happy place” where we don’t have to worry about what might be lurking around the corner?
Last year’s recommended budget projected $54.9 million in recurring revenue and this year’s is $53.6 million, a difference of $1.3 million. But don’t worry, according to the City Manager we will still end up with a 13.8% ending fund balance. Or will we?
How do they maintain FY16’s projected 13.8%? By moving the 911 Communications cost of $1.645 million to a “special fund”, and dividing the ending balance by a lower “Total Expenditures” number. In a recent article by the Observer, a City representative was quoted stating “The city is required to report the utility as an ‘enterprise fund,’ meaning the city has to show the full cost of the operation to give a true picture of its real costs, which in turn helps the city set rates at the proper level to recover those costs,” “Leaving out these charges would distort the true cost of operating the utility.”
I have to wonder if moving the 911 communications cost to a special fund, changes the “true cost” of expenditures. It does not portray an accurate representation of the city’s total expenditures for the general fund. Will this ensure a clean audit or possibly hurt interest rates? According to Finance Director Dan Olsen, if the city didn’t follow the standards (Utility Enterprise Fund), it wouldn’t receive a clean audit, which would hurt its bond rating.
Of more concern is what happens to FY17’s projected 11.1% when you consider the optimistic 5.6% GRT growth and the “special fund” accounting. What would the total expenditures or new percentages be if the payroll, materials and services were added back in? Total Expenditures for FY16 would be $53.8 million, leaving a 13.4% ending fund balance. Further, FY17 would be $55.6 million or 10.77%.
The City Manager’s recommended budget has the answer: It includes the option of imposing a 3/8% sales tax increase; 1/8% sales tax increase would generate approximately $1.1 million this fiscal year. For roads, a road bond could be added, increasing your property tax of course.
The trend is clear, according to the proposed budget, this year’s adjusted ending balance is projected to be $8.78 million, decreasing to $7.21 million in the coming year, and dropping to $5.99 million next year.
It looks like a lesson was not learned from the FY15 budget. One-time revenue saves the day again in the form of $1,837,943 in GRT taxes from large developments that were encouraged by the impact fee moratorium (second tower of Presbyterian, La Vida LLena Retirement Center, and Plaza at Enchanted Hills). Because of these, we have a projected $7.2 million end fund balance. As Mayor Hull said during the Governing Body meeting, we had a feeding frenzy on permits during the moratorium.
Since the moratorium ended we have been in a famine, which translates into a lack of one-time GRT taxes next year. RECURRING REVENUE FOR RECURRING EXPENDITURES!